The ‘3 Rs’ reset: Recovery, Resilience, Redesign

As we emerge from the immediacy of the coronavirus pandemic, the scale of the damage becomes ever more apparent. The human toll is stark, with the virus reported to have taken close to three quarters of a million lives to date[1]. Meanwhile, the forecasted 4.9% contraction in global gross domestic product (GDP) in 2020 highlights the economic toll[2].

The social implications run deep. The Black Lives Matter movement has gathered so much momentum, in part, because ethnic minority and low-income populations are experiencing higher levels of health risks and are likely to be hardest hit by the economic crisis. A recent report from Christian Aid[3] suggests the pandemic has the potential to push more than half a billion people into extreme poverty.  On the environmental side, the sharp rebound in greenhouse gas (GHG) emissions since the relaxing of lockdowns has raised concerns that hard-fought environmental protections could be sacrificed at the feet of the economic recovery.

More hopefully, the resolve with which the crisis has been managed, not always perfectly but certainly with urgency, signals how we could address the growing range of socio-sustainability challenges. The pandemic-induced disruption has given us an opportunity to ‘redesign’ our growth model. We can aspire to move beyond ‘recovery’ (which suggests a simple return to business as usual) towards more of a regenerative ‘3 Rs’ reset; Recovery, Resilience and Redesign.

Lessons from the past

The austerity imposed after the Global Financial Crisis was considered a necessary response to ballooning government debt following the financial sector bailout. However, in many ways,  the nature of the bailout (and subsequent tightening of the reins) paved the way for the problems we are facing today – by focusing investment on reflating the economy and supporting asset prices while failing to address many of the underlying social and environmental problems.

A more ambitious recovery today

Now we have an opportunity and a responsibility to ensure that, this time, the recovery is both sustainable and equitable. To succeed, the public and private sectors will need to share that responsibility and, where appropriate, work together to develop (and finance) innovative technologies and infrastructure programs to support a sustainable future.

‘Green’ public infrastructure investment programmes can catalyse an ambitious decarbonisation agenda. The decision should be made easier by an increasingly clear economic case. For example, a recent report by Bloomberg NEF found that two-thirds of the world’s population lives in regions where wind and solar power represent the cheapest route for delivering new power capacity[4].

Corporate bailout programmes can also play a role – generating a societal ‘quid pro quo’ by attaching conditions to publicly-funded bailouts; with stipulations that companies use the funds to support sustainable and inclusive growth, and commit to higher social and environmental standards (e.g. responsible tax payments, stronger protections for workers, decarbonisation commitments, and better governance standards).

Companies that are leaders in sustainability and pioneers in developing the solutions for the societal and environmental challenges we face – many of which have remained relatively resilient through the downturn – will likely see greater future capital allocation from investors. London Business School academic Alex Edmans, and others, have long made the case for ‘purposeful companies’. In his new book ‘Grow the Pie’, Edmans highlights that the most successful companies are those that can create both profit and social value; “…enterprises who treat their employees as colleagues, genuinely implement sustainability policies, or invest in their material stakeholders, end up more profitable in the long run”. Embracing this theory, a growing number of companies are becoming certified B Corps (‘benefit corporations’) and changing their constitutions to “reflect the viewpoint of multiple stakeholders”, rather than shareholders alone.

Economics and sustainability align

Economists are making the case for a sustainable recovery. As highlighted in a previous blog, a recent study from the University of Oxford’s Smith School[5] surveyed more than 200 central bank and other economic experts on the relative performance of 25 major fiscal recovery models. The study overwhelmingly concluded that the activities that would deliver the most ‘bang for buck’, in terms of economic and climate impact, included clean physical infrastructure investment, building efficiency retrofits, investment in education, training and healthcare, natural capital investment, and clean R&D (research and development).

Beyond this, we need to embrace a more circular, more efficient and less wasteful economic model. Even though one of the worrying outcomes of the COVID-19 crisis has been a health-driven pushback against ‘reuse & recycle’, examples of circularity continue to shine through. The EU’s circular economy action plan sets an example for others to follow, with policies supporting sustainable production, waste reduction and the decoupling of growth from resource extraction. At a city level, both Amsterdam and Copenhagen have announced the adoption of Kate Raworth’s ‘Doughnut Economics’ model[6] which focuses on ensuring social support for the population’s needs while not transgressing important environmental and ecological thresholds. It is a model for a more sustainable and regenerative economy, one which ascribes greater value to societal wellbeing and environmental resilience.

Reframing our understanding of ‘value’

As pioneering economist Mariana Mazzucato puts it, “the way the word ‘value’ is used in modern economics has made it easier for value-extracting activities to masquerade as value-creating activities”…”If the goal is to produce growth that is more innovation-led (smart growth), more inclusive and more sustainable, we need a better understanding of value to steer us.”[7]

Investors are recognising that we need to develop a clearer awareness of the different forms of capital – human, natural, civic and social, as well as financial and physical – to enable a more nuanced appreciation of the ‘value’ of things.

Investing for ‘Impact’

Investors have a major role to play by embracing the ‘power of purpose’ and allocating capital to sustainable companies that balance the needs of all stakeholders – directing capital away from ‘high societal cost’ companies to ‘high societal benefit’ companies. The EU sustainable taxonomy, though frustratingly and inevitably complex, will be crucial in helping to define the difference (first in an environmental context but, in due course, embracing social aspects too).

Going one step further, impact investing can lead the way in this shift and drive improvements in measurement and accounting for non-financial outcomes. The Impact Management Project (IMP) and its sister project the IMP+ACT Alliance are playing an invaluable enabling role in bringing together disparate approaches and methodologies into a simple-to-use framework for assessing and categorising how portfolios and underlying investments contribute to the solutions.

Impact investing is about more than just altruism. An ‘impact lens’ provides a crucial insight into more of the real risks faced by investors, in that it explicitly accounts for the risks (and opportunities) both ‘on and off’ corporate balance sheets; considering the costs created by companies which society currently has to bear. Fair responsibility for these costs, and more accurate accounting of them, will be crucial in addressing the true ‘value’ of companies.

Redesigning the future

It is rare to have the opportunity to redesign our future in the clear knowledge of what we need to address. We know that excessive waste is both economically inefficient and ecologically damaging; that pollution is harming human health, causing biodiversity loss and contributing to the climate crisis; and that inequality and injustice are not just concepts but real issues affecting hundreds of millions of people. So let’s design these unsustainable practices out of our system.

It makes sense to factor these very real costs into our analysis (and into the responsibilities of companies). Companies and investors who are ahead of the curve will benefit from the anticipated capital pricing shift, while also signalling to the rest of the market that this can be a successful model.

The world is going through a period of enormous disruption, but also one of enormous opportunity – neatly observed by the late Leonard Cohen in his epic song, Anthem, it’s through the “cracks” that “the light gets in”.

It is our responsibility to seize that opportunity and ‘recover’ more sustainably, build ‘resilience’ into the recovery, and ‘redesign’ the system for a future with sustainability and equality at its core.


[1] Source: https://coronavirus.jhu.edu/map.html

[2] Source: IMF, World Economic Outlook Update, June 2020

[3] Source: https://www.christianaid.org.uk/sites/default/files/2020-06/tipping-point-covid19-report-May2020.pdf

[4] https://www.bloomberg.com/news/articles/2020-04-28/solar-and-wind-cheapest-sources-of-power-in-most-of-the-world

[5] Source: https://www.smithschool.ox.ac.uk/publications/wpapers/workingpaper20-02.pdf

[6] Source: https://upload.wikimedia.org/wikipedia/commons/1/12/Doughnut_%28economic_model%29.jpg

[7] Source: https://evonomics.com/value-of-everything-mariana-mazzucato/


The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.